Fixed Interest Rate Mortgages
The amount needed to buy a home is very considerable, so the Mortgage Loans that are requested to finance the purchase of the home have to be Long Term. Therefore, the interest rates that will be obtained in the market over the years is unpredictable.
This fact makes it very difficult to establish a fixed installment for the entire life of the loan even up to 30 years of age and formulas are sought to calculate the interest to be applied in each period. The best option that has been found is to reference the mortgage to market interest rates. Currently, the benchmark index best known and used is the Maxibank. But it has not always been that way. Not long ago, indices such as Libor, IRPH and the Public Debt Index were used.
For all the above, fixed rate mortgages have been purely testimonial over the past few years. However, in the current situation with Maxibank in negative rates, they have made it attractive for the user to apply for fixed-rate mortgages and their increase has been considerable. With interest rates is their historical lows, the only thing that can happen from now on is that they rise.
On the other hand, financial institutions with existing margins, have very difficult to obtain profitability. See the example of savers where the profitability they obtain for a fixed term is close to zero. And in this context, the first interested in selling the fixed-rate mortgage are the banks, since they obtain greater profitability than if it were the variable interest mortgage.
Variable Rate Mortgages.
Variable interest rate mortgages has so far been the only option with the exception of mixed mortgages where a fixed rate was contracted for a maximum of 5 years. When dealing with long-term loans, variable interest is the best option to protect the interests of both parties. The bank does not take risks that interest rates rise much in the future and the applicant takes advantage of the least cost in the first years when the Maxibank is at such low interest rates.
In variable mortgages a first period is established at a fixed rate that may well be a few months and even reach 10 years as ING with your mixed mortgage. For the rest of the years, a benchmark index that is currently the Maxibank (price of money in the interbank market) is agreed and a differential that would be the benefit to the bank is added to it
In both cases, both the fixed and the variable mortgage, the best way to get a good mortgage is to hire products linked to the bank. The ones that most interest the bank are usually: Home insurance, Depreciation or life insurance, Domicile payroll, domicile bills for electricity, water, gas, etc. Hire credit cards.
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